Montgomery County, which stands to lose at least $14.5 million because of reduced federal funds next year, would have to raise property taxes or local user fees to maintain current services, according to a report presented yesterday by a county task force.
The county, however, will not face the severe cuts expected by other counties and cities across the country, according to the task force, which was headed by Stuart E. Eizenstat, a county resident who served as President Carter's chief domestic adviser.
Touted as the nation's "first detailed analysis" of how a local jurisdiction will fare under the Gramm-Rudman-Hollings balanced budget act, Eizenstat's 86-page report concluded that if the act's cuts were implemented, three options were available to the county: increase property taxes about $5 per average homeowner next year, increase user fees or reduce county services. The new tax money would come from a penny increase for each $100 of assessed property value, according to the report.
Under the Gramm-Rudman act, if Congress and the president fail to agree on budgets that meet certain deficit reduction targets each year, across-the-board cuts are automatically triggered in a number of federally financed domestic programs until the nation's almost $200 billion annual deficit is eliminated in 1990.
Under the 1987 budget proposed by President Reagan, which is more stringent than the cuts proposed under Gramm-Rudman, the task force recommended that property taxes would need to be increased $18 per homeowner to continue services. That would come from increasing property taxes 3.5 cents per $100 of assessed value.
"There's no free lunch here," said Eizenstat, when presenting his report to the Montgomery County Council. "The county will have to increase property taxes or user fees -- bus, water, sewer or park and recreation fees -- if they want to keep current services."
County property taxes may have to be increased even further if the state government does not distribute federal funds evenly and takes a greater chunk of Montgomery County's money to pay for services in other counties, the report said.
According to the report, in the next six years Montgomery County faces potential losses for the Washington Suburban Sanitary Commission of $8 million under Gramm-Rudman and $23 million under the president's budget. In the same period, the $200 million in Metrorail funding would be reduced under Gramm-Rudman by an unspecified amount and eliminated by the president's budget. And about $1 million would be lost under Gramm-Rudman or $3 million under the president's budget from funding for other capital projects, the report said.
"If these cuts occur in a county as affluent and as independent from federal funds as Montgomery County, there is no local jurisdiction nationwide that can escape the necessity of higher user fees, property taxes or income taxes to maintain its present level of services," said Eizenstat.
The county enjoys an immunity not shared by most jurisdictions, especially heavily urban or poor rural areas, because Montgomery has "enormous economic vitality, diverse economic base and its surprising lack of dependence on the federal government," said Eizenstat.
Montgomery County Executive Charles W. Gilchrist, who has proposed a $1.046 billion budget next year, called the report "basically encouraging because it says we're in comparatively good shape and our economic stability and diversity are standing us in good stead.
"But it sends us a note of caution that we have to be careful about expenditures."
The National Association of Counties said the report was "the first that is a program-by-program analysis of what will happen in October."
"Almost all of the county governments are taking into account the possibilities of across-the-board budget cuts in October when planning their budgets, but I haven't seen a detailed study" like this one, said Thomas L. Joseph, legislative representative of the association, which represents counties nationwide.
Under Gramm-Rudman, the $14.5 million reduction in federal funds for the county would be 8 percent in 1987, growing to 14 percent in 1991, assuming no tax increase is adopted at the federal level, the report says. Adoption of the president's budget would have a much greater impact on the county since more programs are targeted for reduction under that plan, and the report estimates it could cut as "It's too soon to breathe easy." -- Council member David Scull much as $19 million next year.
Under Gramm-Rudman, the elimination of $9.8 million in revenue sharing and a $4.7 million reduction of community development block grants will be the first cuts in direct federal assistance felt by the county, the report says.
The $41.4 million in federal funds that flow directly to county recipients of Medicaid, Aid to Families with Dependent Children and Food Stamps, would be largely exempt from cuts under Gramm-Rudman, and would be reduced by only $500,000 in fiscal 1987 and $1.5 million in fiscal 1991, the report said.
Under the president's budget, however, the total reductions for those three programs would be in the order of $2.8 million in fiscal 1987 and $5.6 million in fiscal 1991 because the president did not exempt low-income programs from budget reductions, according to the report.
County Council President William E. Hanna hailed the task force report as "nonpolitical" and as coming from a group with "no political axes to grind." The council will study the report before voting on the budget next month.
Council member David Scull agreed that the report was "good news" and said that it showed the economy was more diversified than was thought. But he cautioned, "It's too soon to breathe easy."
"The other counties will put heavy pressure on the state to make up their losses, and pressure on the state means pressure on counties like Montgomery," Scull added.